CMOs / CDOs
Criminal Probe Initiated Regarding Auction Rate Securities Sales
According to this Wall Street Journal article, federal prosecutors in New York are investigating sales of auction rate securities by two former Credit Suisse brokers. According to the article, the investigation allegedly involves representations made that the auction rate securities were backed by student loans, when in fact they were actually backed by CDO’s (collateralized debt obligations). This appears to be the first reported criminal investigation related to Auction Rate Securities Sales.
If you are an investor stuck with Auction Rate Securities, and you would like a free consultation to discuss your legal options with an attorney, please contact Greco & Greco.
Posted by Greco & Greco on 07/09 at 09:44 AM
Auction Rate Securities (ARS) •
Brokerage Firms •
Credit Suisse •
CMOs / CDOs •
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Auction Rate Securities Redemption Analysis
In this Barron’s article, the author sets out one of the more complete analyses we have seen regarding the various types of frozen Auction Rate Securities, and their likelihood (or unlikelihood) of being redeemed or sold in the future. The various types of ARS reviewed in the article include Municipal Issuers, Taxable Closed-End Funds, Municipal Closed-End Funds, Student Loans, and Collateralized Debt Obligations (CDO).
According to the article, the bleakest outlook is seen for the ARS backed by Student Loan Funds and CDOs which comprise about one-third of the ARS market ($105 billion of the $333 billion market). Only about $1 billion of the $85 billion in student loan ARS have been refinanced to date due to high refinancing costs and little incentive to refinance the comparatively low rates these ARS are paying.
The Collateralized Debt Obligation ARS are an even thornier issue. The Barron’s article states that the $20 billion in these ARS won’t be redeemed and that some may have invested in subprime mortgage securities. The chart at the end of the article estimates the market price of these securities at 50 cents on the dollar.
Many brokerage firms marketed and sold ARS to investors as safe, liquid alternatives to money market funds. If you are stuck with frozen ARS and you would like a free consultation to discuss your legal options with an attorney, please contact Greco & Greco.
Posted by Greco & Greco on 05/28 at 09:08 AM
Auction Rate Securities (ARS) •
CMOs / CDOs •
Subprime Mortgages •
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New York subpoenas firms in mortgage fraud probe
Reuters has reported here that the state of New York has subpoenaed three large Wall Street banks (Merrill Lynch, Bear Stearns, and Deutsche Bank) pursuant to a probe related to the creation of mortgage-backed securities. The New York probe reportedly is looking into how mortgages were packaged together by Wall Street to create securities sold to investors and the banks’ relationship with credit-rating firms.
Posted by Greco & Greco on 01/11 at 04:36 PM
Brokerage Firms •
Bear Stearns •
Deutsche Bank •
Merrill Lynch •
CMOs / CDOs •
State Regulators •
New York •
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Merrill reduces value of assets linked to subprime mortgages
Merrill Lynch warned last week that it was reducing the value of certain securities linked to subprime mortgages, thereby reducing its third quarter profits. Reuters article.
Posted by Greco & Greco on 09/21 at 02:20 PM
Brokerage Firms •
Merrill Lynch •
CMOs / CDOs •
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CMOs and Mortgage Backed Securities
CMOs, or collateralized mortgage obligations, are bundles of mortgages which are then divided up for sale by investment banks. Different types of these mortgage backed securities can vary widely in risk for investors, but recent problems with the subprime mortgage lending market could portend future problems for individual investors who have been sold these types of securities without their brokers fully explaining the risks involved. As set out in the following linked news stories, customers of Brookstreet Securities and Wedbush Morgan Securities have filed arbitration claims against their brokerage firms related to the sale of CMOs and other mortgage securities.
Wall Street Journal article
Orange County Register Article
Posted by Greco & Greco on 07/20 at 02:21 PM
Brokerage Firms •
Brookstreet •
CMOs / CDOs •
Suitability •
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